Risk-averse investors pouring money into bonds could become stock market bulls in a hurry with only modest shifts in economic and political sentiment, local managers said at a forum Thursday.
Although stocks have performed well in recent days, said Ken Roberts, trading volume has been low because small investors remain distrustful, and unclear about where the market will go next.
“Is the market forecasting a bad thing that doesn’t happen?” asked Roberts, president of Ken Roberts Investment Management Inc. and a longtime market observer.
Dan Cronen, a principal of Signia Capital Management LLC, said a rally triggered by investors forced to buy stocks as prices recovered could be compounded by “me-too” investors, followed by individuals afraid they might miss the next bull run.
“You could have a fast and furious market,” he said.
Craig Hart, president of Hart Capital Management Inc., said he is “shocked” by historic low prices in stocks like Intel, which by some measures is selling at its lowest price in 25 years.
All three said large high-tech companies were among the best buying opportunities, along with health care and energy.
Hart said investors distracted by confusing economic and political signals will regret they ignored individual stocks like UPS and FedEx that dominate shipping.
Roberts said that if congressional elections swing Republican, and President Barack Obama moves to the political center as President Bill Clinton did after 1994, the result should be good for the economy.
A government divided between a Republican Congress and Democratic executive has historically been good for stocks, Hart said.
But Roberts cautioned that deleveraging — paying down debt, individual and governmental — will take time.
“We got ourselves in a fine mess,” he said. “There is no quick fix.”